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Ramalingam

Ramalingam Kalirajan  |7159 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 18, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Gkp Question by Gkp on Apr 18, 2024Hindi
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Thanks a bunch for the response Mr.Ramalingam sir. I would really appreciate if you can shed some light on few flexi cap funds. Do you think I have to stop any current fund or continue with same and add either of large or flexi cap fund to the folio for diversification and risk appetite. I have twin girls of age 2 and wanted to save big numbers for their future alongside. Thanks for your time again!!

Ans: Flexi cap funds are a popular category in mutual funds that offer flexibility in terms of investment across market capitalizations (large cap, mid cap, and small cap). These funds can adapt to market conditions and capitalize on opportunities across sectors and market segments.

Advantages of Flexi Cap Funds:

Diversification: Flexi cap funds invest across market caps and sectors, providing diversification and potentially reducing portfolio volatility.
Flexibility: The fund manager has the flexibility to shift allocations based on market conditions, which can help in capitalizing on opportunities and managing risks.
Potential for Growth: Flexi cap funds can benefit from growth opportunities across the market spectrum, from large established companies to smaller, high-growth potential companies.
Should you stop or continue with current funds?

Assess Current Portfolio: Evaluate your current mutual fund portfolio to understand its composition, performance, and alignment with your investment goals.
Check Overlapping: If your current funds already have significant exposure to large cap stocks, adding a flexi cap fund can provide exposure to mid and small cap segments, enhancing diversification.
Risk Appetite and Diversification: If you have a moderate to high-risk appetite and are looking for diversification across market caps, adding a flexi cap fund can be beneficial. However, if your current portfolio is well-diversified and aligned with your risk profile and investment goals, there may not be a need to stop any existing funds.
Performance Review: Regularly review the performance of your existing funds. If any fund consistently underperforms its benchmark or peers, consider replacing it with a better-performing option.
Considerations for Investing for Twin Girls' Future:

Long-Term Horizon: Since your twin girls are just 2 years old, you have a long-term investment horizon. Flexi cap funds, with their adaptability and potential for growth, can be suitable for long-term investment goals.
Risk Tolerance: While aiming for high returns, it's crucial to consider your risk tolerance. Ensure your investment strategy aligns with your risk tolerance to avoid potential stress during market downturns.
Regular Review: As your daughters grow and their financial needs evolve, regularly review and adjust your investment strategy to ensure it remains aligned with their future goals.
Consultation with Financial Planner: Given the importance of saving for your daughters' future, it's highly recommended to consult with a certified financial plannerr. They can provide personalized advice based on a thorough understanding of your financial situation, goals, and risk tolerance.
Remember, while flexi cap funds can be a valuable addition to your investment portfolio, it's crucial to choose funds that align with your investment goals, risk tolerance, and time horizon. Always consider seeking professional advice before making investment decisions.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |7159 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 30, 2024

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Hi Team, Is Flexi fund good or Multicap fund good to invest for next 15 years
Ans: Flexicap and Multicap funds are both equity mutual funds, but they have key differences. Both categories offer diversification, but their strategies in stock selection vary.

Flexicap Funds: These funds invest in companies of any market capitalization—large, mid, or small cap. Fund managers have the freedom to shift between different market caps based on market conditions, offering flexibility. If the market favors large caps, they can increase allocation to them, and vice versa with mid and small caps. This adaptability is crucial for long-term wealth creation.

Multicap Funds: These funds are required by regulation to allocate a minimum of 25% each in large, mid, and small cap stocks. This gives the fund a more balanced exposure to all three segments, but the fund manager has less flexibility to navigate changing market conditions. Multicap funds are ideal for investors who want steady exposure across different market caps at all times.

For a 15-year horizon, the decision between the two should depend on your risk tolerance and financial goals.

Flexicap Funds: Strengths and Considerations
Market Timing Flexibility: The fund manager’s ability to move across market caps based on opportunities can lead to better returns over time. If large caps are expected to underperform and small caps are set to rise, the fund manager can dynamically adjust the portfolio.

Lower Volatility: Flexicap funds can reduce risk by allocating more to large caps during market downturns. This strategy gives some downside protection, as large-cap companies tend to be more stable during volatile times.

Growth Potential: In a rising market, the flexibility to invest in small and mid-cap stocks can offer high growth. Historically, small and mid-cap stocks have outperformed large-cap stocks over the long term, though they carry more risk.

However, Flexicap funds are more dependent on the skill of the fund manager. A less skilled manager might not take advantage of the flexibility, leading to lower returns.

Multicap Funds: Strengths and Considerations
Balanced Exposure: Multicap funds provide exposure to all market segments—large, mid, and small caps. This allocation ensures that your portfolio is not overly concentrated in one type of stock. With 25% in each category, these funds capture the potential of all market segments.

Steady Growth: The balanced nature of Multicap funds ensures that you participate in the growth of small and mid-caps, while large-cap stocks provide stability. This makes multicap funds a suitable choice for long-term investors who seek consistent exposure.

Risk Mitigation: By maintaining a minimum allocation in large-cap stocks, multicap funds have a buffer against volatility. Large-cap companies tend to provide a cushion during market downturns.

However, the regulatory requirement of a fixed allocation to each market cap means that the fund manager cannot shift the portfolio freely. In a downturn for small or mid-cap stocks, the fund may underperform compared to Flexicap funds that can adjust to safer large-cap stocks.

15-Year Investment Horizon and Wealth Creation
For a 15-year investment horizon, both Flexicap and Multicap funds have the potential to create substantial wealth. Over the long term, equity investments tend to outperform other asset classes, and both fund categories are well-positioned to ride through market cycles.

Wealth Growth: Both Flexicap and Multicap funds are designed for long-term wealth creation, but Flexicap funds may offer higher growth potential due to their flexibility. However, this depends heavily on market conditions and the fund manager's ability to allocate correctly.

Risk and Volatility: Over 15 years, both funds will experience periods of volatility. While Multicap funds may provide more balanced exposure to mitigate risk, Flexicap funds offer the flexibility to move into safer large caps during downturns.

Investment Discipline: Regardless of the fund type, staying invested for the entire period is crucial. Markets are cyclical, and periods of downturns are often followed by strong recoveries.

Choosing the Right Fund for You
Consider Flexicap Funds If:
You prefer flexibility and trust the fund manager’s ability to shift across market caps based on market conditions.

You are comfortable with a higher degree of fund manager involvement and are willing to accept more volatility in exchange for potentially higher returns.

You want the ability to take advantage of changing market trends without being constrained by a set allocation to large, mid, or small caps.

Consider Multicap Funds If:
You want a balanced, steady approach that invests in large, mid, and small caps consistently, regardless of market conditions.

You prefer a more predictable structure where the fund does not deviate much from its mandate of exposure to all market segments.

You want diversification across all caps but prefer less reliance on the fund manager’s ability to time the market effectively.

Disadvantages of Direct Funds and Importance of Professional Guidance
If you are investing in direct mutual funds, you may miss out on valuable advice. A certified financial planner can offer personalized advice on portfolio selection, allocation, and periodic review. While direct plans have a lower expense ratio, the lack of professional guidance could result in suboptimal returns.

Regular plans, when invested through a qualified MFD (Mutual Fund Distributor) with CFP credentials, offer more comprehensive service. The expertise of a CFP ensures your investments are aligned with your long-term financial goals, while providing regular reviews and adjustments. They can also help with tax-efficient withdrawals and retirement planning, which is crucial for a 15-year horizon.

Long-Term Strategy
For the next 15 years, it is important to focus on growth while managing risk. Here are key points to consider:

Review Periodically: Regardless of whether you choose a Flexicap or Multicap fund, periodic review of your portfolio is essential. Your risk appetite may change over time, and your financial goals may evolve.

Stay Invested During Volatility: Both fund types will experience market volatility. A long-term horizon means you should not be overly concerned with short-term market fluctuations. Focus on staying invested and letting your corpus grow.

Asset Allocation: In addition to Flexicap or Multicap funds, consider having a balanced asset allocation. As you approach the end of your 15-year horizon, you may want to gradually shift to safer instruments like debt funds.

Tax-Efficient Withdrawals: At the end of your investment period, you may want to set up a systematic withdrawal plan (SWP) to ensure tax-efficient withdrawals for income generation.

Final Insights
Both Flexicap and Multicap funds offer potential for growth over a 15-year period, but the choice depends on your comfort level with fund manager flexibility versus structured exposure.

Flexicap funds are ideal if you seek higher returns with a dynamic approach, while Multicap funds offer balanced, diversified exposure.

It’s important to have a certified financial planner by your side to ensure you are making the most of your investments and taking advantage of market opportunities.

Periodic reviews, staying invested through market cycles, and maintaining a long-term perspective are key to wealth creation.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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Milind

Milind Vadjikar  |702 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Nov 26, 2024

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Hi Experts, I seek your guidance on my mutual fund portfolio. Below are the details: Total Portfolio Details: - Total Invested Amount: ?15,76,159 - Current Value: ?19,35,234 - Total Returns: ?3,59,075 (+22.78%) - XIRR: 20.75% Monthly SIP Contribution: ?1,18,000 Breakdown of monthly SIP contributions across funds: 1. Parag Parikh Flexi Cap Fund Direct Growth – ?30,000 2. SBI Large & Midcap Fund Direct Plan Growth – ?15,000 3. SBI Magnum Mid Cap Fund Direct Plan Growth – ?20,000 4. Nippon India Large Cap Fund Direct Growth – ?30,000 5. Nippon India Small Cap Fund Direct Growth – ?7,500 6. ICICI Prudential Technology Direct Plan Growth – ?10,000 7. Quant Small Cap Fund Direct Plan Growth – ?7,500 8. HSBC Small Cap Fund Direct Growth – ?5,000 9. Edelweiss US Technology Equity Fund of Funds Direct Growth – ?5,000 Can you suggest if I am on track to create 5 CR corpus in 10 years I have ?25 lakh invested in a Fixed Deposit (FD) in my mother’s account, earning an interest rate of 7.75%, to generate tax-free returns. Additionally, I’m planning to purchase a plot worth ?30–50 lakh in the next 1–2 years. Is it a good idea to keep the money in FD for now, or are there better short-term investment options I should consider to maximize returns while keeping the funds accessible for my future purchase? Looking forward to your suggestions! Thank you!
Ans: Hello;

Your monthly sip value adds upto 1.3 L however you have claimed it to be 1.18 L. (Maybe a typo).

Existing corpus(19.35 L) and monthly sip (1.3 L) won't reach 5 Cr in 10 years.

You have two options to make it happen:

1. Increase monthly sip amount to 1.9 L.

2. Top-up current monthly SIP of 1.3 L by minimum 10% each year for 10 years.

Both ways will lead you to a corpus of 5 Cr over 10 years.

You may consider money market mutual funds for parking your funds for a 1 year horizon. Returns may be comparable to FD returns but with flexibility to withdraw anytime. They typically have low to moderate risk.

Happy Investing;
X: @mars_invest

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Nayagam P P  |3928 Answers  |Ask -

Career Counsellor - Answered on Nov 26, 2024

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Is doing BBA + Law (Honors) from BITS Law is worth
Ans: Anju, prior to addressing the question, I would like to draw your attention to a recent article in 'The Times of India' which indicates that a majority of law graduates tend to favor employment in corporate settings over practicing in courts. Now, coming to your question, please note, BITS Law School's BBA + LLB (Hons) program is a 5-year program that combines business administration with legal studies. The program focuses on areas such as corporate law, intellectual property, business laws, and dispute resolution. The program offers a strong multidisciplinary approach, preparing students for careers in corporate law, legal consultancy, and management. Its strengths include a business + legal acumen curriculum, industry-driven curriculum, and a reputation for excellence in education and placement opportunities. However, it lacks the legacy and alumni network of top-tier law schools and can be expensive. Career opportunities include corporate and business law, management roles, consulting, entrepreneurship, academia/research, international arbitration, cyber and technology law, corporate governance, and intellectual property rights. The program is worth considering if you aim for a corporate or business law career, are comfortable with the cost and value of the BITS brand, and have excellent industry connections and internships. Build your profile well by the time you complete your BBA+LLB & improve your all other skills required. All the BEST for Your Prosperous Future.

To know more on ‘ Careers | Education | Jobs’, ask / follow Us here in RediffGURUS.

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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